Increasing the Minimum Wage for Direct Support Professionals
Presented by James Parrott, PhD, Deputy Director and Chief Economist
Fiscal Policy Institute
March 2016
The government-funded human services sector is one of the largest low-wage employers in New 
York State. Statewide, the human services sector encompasses nearly 870,000 workers, and nearly half (over 48 percent)—420,000—would benefit from an increase in the minimum wage to $15. The affected workforce is roughly evenly divided between New York City and the rest of the state. Those working under contract to OPWDD agencies number about 100,000 of the total.
When the minimum wage reaches $15 an hour in New York City at the end of 2018 under Governor Cuomo’s proposal, it will help low-wage workers come closer to meeting basic family budget needs. To afford a modest, no-frills household budget a single adult in the New York City area working full-time will need an hourly wage of $23.13 in 2019, according to the Economic Policy Institute’s Family Budget Calculator. A household with two working parents and two children would need each parent to make $21.72 an hour just to make ends meet.
The human service workforce includes a broad range of workers, including home health aides, personal care assistants, direct support professionals, alcohol and substance abuse counselors, foster care case workers, afterschool program leaders, homeless shelter workers, preschool teachers, and home-based childcare providers. Many of these occupations have been traditionally held by women and underpaid for far too long for reasons we understand all too well. This is despite the fact that services such as those provided by home health care aides, personal care aides or substance abuse counselors allow clients to function better on their own, saving taxpayers millions of dollars each year.
This workforce provides essential public services, and is, in effect, the state’s indirect workforce. The state saves considerably by providing these services through non-profits. But it is untenable for the state to continue exploiting this workforce by paying unconscionably low wages.
This is the best opportunity to right a wrong that has been permitted to exist for far too long. My organization, the Fiscal Policy Institute, together with the Federation of Protestant Welfare Agencies and the Human Services Council, two umbrella groups that represent hundreds of nonprofits employing tens of thousands of human service workers, recently issued a report documenting the importance of including the social assistance and child care component of the broader human services sector in a statewide $15 an hour minimum wage.
With wages so low, and bare bones fringe benefits, employee turnover is very high in this sector, often such that it compromises the quality of service delivery. Most of the employers in this sector are non-profits providing services under government contract or are reimbursed under Medicaid. Non-profits do not sell their services, which are essential public services after all, so they cannot raise prices, and they do not have a profit margin they can shave to pay higher wages.
Also, local and state governments have mostly under-funded human service contracts in the wake of the recession despite an increase in hardships. State human services contracts and Medicaid reimbursement rates need to be adjusted so that these organizations can pay higher wages.
We estimate that raising the wage floor in the state-funded human services sector – excluding home health care and developmental disabilities services – would cost $60 million-$75 million in the first year and approximately $250 million-$300 million yearly when fully phased in over the next six years. These estimates assume some spill-over wage increases are provided to workers slightly above $15 an hour to avoid an undue compression of an organization’s overall wage scale. Providers in the developmental disabilities field have estimated the state cost of a wage increase there at $135 million in the first year.
State fiscal resources exist to increase funding for human service contracts and to adjust Medicaid reimbursement rates so that this vital workforce can share in the benefits of a higher state minimum wage. State tax revenues are growing faster than projected state spending, and are forecast to continue doing so over the next four years, provided that the state does not enact further tax cuts on top of the tax cuts enacted in the past three years that already will increase in cost to over $2 billion a year by 2020.
In addition, there will be a “fiscal dividend” from a higher minimum wage. The state should see some savings from reduced public assistance costs as incomes for some workers will rise above eligibility levels, and there will be some increase in income and sales taxes paid by workers benefitting from the rising wage floor.
It is absolutely imperative that the state provide funding to increase the pay for workers providing critical human services, health care services, and services for people with developmental disabilities. This workforce cannot be stranded while wages rise all around it. Quality public service delivery would then be impossible as this sector would be unable to attract the skilled and dedicated professionals that are required. A phased-in $15 minimum wage makes compelling economic sense for New York State. But it is essential that funding be provided and Medicaid reimbursement rates raised so that the broad human services sector can share in that economic improvement. As our campaign says, “#15 and Funding.”
Sources:
James A. Parrott, Fiscal Policy Institute, Testimony before NYS Senate Standing Committee on Labor, Overall Impact of a $15 State Minimum Wage, Albany, New York, January 7 2016.
http://fiscalpolicy.org/wp-content/uploads/2016/01/Min-Wage-Senate-Labor-Testimony-Parrott-1-7-16.pdf
James A. Parrott, Fiscal Policy Institute, Testimony before Joint Legislative Hearing on the 2016-2017 Executive Budget Proposal, Workforce Development Hearing, Overall Impact of a $15 State Minimum Wage, Albany, New York, February 3, 2016. http://fiscalpolicy.org/wp-content/uploads/2016/02/Parrott-Min-Wage-Workforce-Dev-Budget-Hearing-Testimony-2-3-16-Final.pdf
Federation of Protestant Welfare Agencies, Fiscal Policy Institute, Human Services Council, A Fair Wage for Human Services Workers: Ensuring a government funded $15 per hour minimum wage for human services workers throughout New York State, December 2015.
http://fiscalpolicy.org/wp-content/uploads/2015/12/15andFunding-Report-Dec2015.pdf
National Employment Law Project, How Much do New York’s Workers Need? At Least $15 per hour—Both Upstate and Down, Fact Sheet, January 2016. http://www.nelp.org/content/uploads/Fact-Sheet-How-Much-New-York-Workers-Need-15.pdf